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In Victory for the West, W.T.O. Orders China to Stop Export Taxes on Minerals

The appeals panel of the World Trade Organization ruled on Monday that China must dismantle its system of export taxes and quotas for nine widely used industrial materials.

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The legal setback for Beijing could set a precedent for the West to challenge China’s export restrictions on other natural resources, including rare earth metals that are crucial to many modern technologies, trade experts said.
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In the closely watched case, the trade organization’s Appellate Body, its highest tribunal, ruled that China distorted international trade through dozens of export policies it maintains for bauxite, zinc, yellow phosphorus and six other industrial minerals.

The Appellate Body, reviewing an earlier decision by a W.T.O. dispute settlement panel, said the panel had gone too far in defining why more than three dozen Chinese policies violated free trade rules. But the appeals group said on Monday that the overall effect of China’s export restrictions was harming international trade and the policies would have to be scrapped.
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The case was filed in 2009 against China by the United States, the European Union and Mexico.

“This is a major win for the United States,” said James Bacchus, a former chairman and longtime member of the Appellate Body, who now helps lead the global trade practice in the Washington office of the law firm Greenberg Traurig.
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Mr. Bacchus predicted that China would comply with the World Trade Organization ruling. Beijing has a strong record of adhering to adverse W.T.O. decisions, recognizing that it needs the access to foreign markets that the trade organization provides.

China’s commerce ministry said in a statement on its Web site that it regretted the ruling but appeared to indicate it would accept it, saying that it would act in accordance with W.T.O. rules to “achieve sustainable development.”
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Ron Kirk, the United States trade representative, said in a statement that the ruling was “a tremendous victory” for the United States. “Today’s decision,” he said, “ensures that core manufacturing industries in this country can get the materials they need to produce and compete on a level playing field.” ugg outlet store

The case has been one of the most widely watched trade disputes in many years because of the precedents it could set for other, even more crucial natural resources. Those will almost certainly include China’s export quotas on rare earth metals, for which Chinese policies appear to have raised similar legal concerns.

Rare earths, however, were not part of the trade case on which the trade organization ruled Monday. Besides bauxite, zinc and yellow phosphorus, the other six industrial minerals are coke, fluorspar, magnesium, manganese, silicon carbide and silicon metal.
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China is the largest or among the largest producers of each of these. The United States, European Union and Mexico accused China of using export taxes and quotas to force international chemical companies and other businesses to move their factories to China to tap these resources.

Those sorts of forced migrations are the reason international trade rules bar export quotas in many cases. Many non-Chinese companies have already been setting up factories in China, for example, to gain access to the crucial rare earth metals used in a wide range of modern technologies, since China began clamping down on rare earth exports in recent years.

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